Postal Disservice: No Stamp of Approval for Just One Side of a “Hypothetical Negotiation”

Our nation’s great capitol is home to many museums, national monuments, and of course the White House. In addition to all these symbols of American history is The Column. The Column, the centerpiece of the National Mall, is a collection of nineteen steel structures commemorating Korean War Veterans. Tourists gather around these statues with their digital cameras snapping away, in an effort to capture these unique structures that evoke a military platoon. But it is not just tourists and school trips that surround The Column these days, its controversy as well.

In commemoration of the 50th anniversary of the Korean War, the U.S. Postal Service issued a stamp, in 2002, featuring The Column. The Column was created by artist Frank Gaylord, a World War II veteran. Frank Gaylord worked for five years on this project inspired and motivated by his experience in the 17th Airborne.

What stamp collecting enthusiasts everywhere might not know is that the U.S. Postal Service issued the stamps without negotiating a proper licensing agreement with the creator. Instead, the U.S. Postal Service only licensed the photograph, taken by John Alli, of the statues covered in snow. The proverbial chill was felt throughout the court room when Frank Gaylord, a veteran and true patriot, was now pitted against the government in an effort to protect his federal copyrights.

Having survived various rulings and appeals, including an initial ruling dismissing the case as fair use, the artist won a great victory at the “hypothetical negotiation” table. The U.S. Court of Appeals in the recent Gaylord v. U.S., 678 F.3d 1339 decision, refused to let the U.S. Postal Service strong-arm the artist into accepting the government’s terms for damages. The Court stated that the lower courts “zone of reasonableness approach” only took into account the amount the U.S. Postal Service usually pays for licensing stamp images, a mere fifteen hundred to five thousand dollars ($1,500 – $5,000). Hence, the lower court only took into consideration one side of the negotiation table.

The Court vacated and remanded the decision stating that the proper measure for damages was “what the owner has lost, not what the taker has gained.” Therefore, Gaylord’s past licensing agreements which usually included an 8-10% royalty rate should have been considered. The Court explicitly demanded that “all evidence relevant to the hypothetical negotiation” be considered. As a result, the U.S. Postal service might have to pay 8-10% in royalties — close to $30.2 million dollars in profit they made from the stamps.

This decision reminds those negotiating to resolve a copyright dispute, that the negotiation table has two sides and just because a position and compensation practice is standard for copyright cases does not mean that it is the only way to resolve a damages dispute. Here the court acknowledged that the measure of damages could include a royalty formula rather than a one-time license fee based on the practice of the artist and may result in a significantly higher damages reward that the license fee previously awarded.